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spk15: Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the DoorDash fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. We ask today that you limit yourself to one question and one follow-up. Thank you. Andy Hargraves, you may begin your conference.
spk21: Thank you, Emma. Good afternoon, and thanks for joining us for our fourth quarter and full year 2022 earnings call. I'm very pleased today to be joined by co-founder, chair, and CEO, Tony Hsu, CFO and incoming president and COO, Prabir Adarkar, and VP of Finance and Strategy and our incoming CFO, Ravi Anaconda. We'll be making forward-looking statements during today's call, including our expectations for our business, financial position, operating performance, our market, guidance, strategies, our investment approach, and the consumer spending environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties are described in our SEC filings, including Form 10-Ks and 10-Qs. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial measures, including our reconciliation of such non-GAAP measures to the most directly comparable GAAP financial measures, may be found in our letter to shareholders, which is available on our IR website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call is being audio webcast on our IR website, and an audio replay of the call will be available on our website shortly after the call ends. With that, I will pass it to Tony for some brief remarks, and then we'll go into questions.
spk20: Tony. Thanks, Andy. Hey, everyone. Thanks for joining us today. Typically, we just dive right into Q&A, but for today's call, I wanted to say a few words at the top about Christopher, Prabir, and Ravi. I'm sure many of you have seen the news that we're naming Prabir president and chief operating officer and Ravi as CFO, as Christopher retires from operating roles and day-to-day management. In his seven-plus years here, Christopher, or CP as we call him internally, has helped to shape our business and our culture. He infused an operator mindset across the company and coached an entire generation of our leaders. On a personal level, I will miss him. I've learned so much from him and consider myself lucky to count him as a business partner and friend. Today's news is a chance to celebrate CP's 33 incredible years as an operator and what he has helped us build. It also shows the strength of our systems and the amazing team we have built at DoorDash. Prabir and Ravi have been with us for more than four years and have mastered every aspect of our business. Both are without equal in this space, and I'm excited for what they'll achieve and what we'll continue building together. Over our near 10-year history, DoorDash has been fortunate to have had a remarkably stable and high-quality leadership team. Nonetheless, everyone in our team has a succession plan. We knew that CP wouldn't always be here, and we've been ready for this possibility for some time. And we're always developing our bench of talent as well as our systems and processes so that the right people can step up when ready. We operate in a very complicated and dynamic space. And the understanding of nuance and the ability to translate this intuition into pragmatic judgment takes time. We're lucky that we have two people we've been grooming for a while and a group of operators behind them to continue executing with excellence without skipping a beat. Prabir and Ravi are also excellent stewards of our unique culture. Again, I wanna thank CP for everything he's done and congratulate both Prabir and Ravi. I'm super excited for what's ahead because as CP likes to say, we're just getting started. With that, I'll turn it back over to Andy and let's get started with your questions.
spk14: Emma, we can go to questions now. Take the first question, please.
spk15: Thank you. As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. And please limit yourself to one question and one follow-up. Your first question comes from the line of Deepak Mathavanan with Wolf Research. Your line is now open.
spk12: Great. Thanks for taking the questions. So a couple questions. First, Tony, the guidance paragraph in your press release noted ongoing significant investments reflected in the outlook. Can you update us on what the largest areas of incremental investments plan for 2023 or which businesses are getting additional capital and are showing promising growth and scaling potential. And then second one for Prabir, congrats on the new roles. There's definitely some uncertainties around potential regulation in markets like New York City. I know the proposal is delayed until sort of the end of the month, but how are you thinking about the impact on your business currently and kind of what have you factored into the preliminary 2023 outlook? Thank you so much.
spk20: Hey, Deepak. I'll take a stab at both of those questions and feel free, others to chime in. I think your first question was really just around how we were thinking about our capital allocation. To start, I think it's important to just level set on our philosophy for investing, which has stayed the same ever since we've been a public company and really has been the same since day one in building DoorDash, which is our goal is to maximize long-term profit dollars. And so that both has a scale component to it as well as a unit economics component to it. And to me, both of them are very important and it's most important to get the sequencing right so that we are allocating capital in the most efficient ways. So when you look at this allocation for whether it's 23 or in the years to come, a lot of the investment is going towards in building our categories beyond restaurants, both in the United States as well as globally, as well as our operations outside of the U.S. as we're now live in 26 countries. I mean, I think it's been remarkable the progress that we've seen so far in both the share gains as well as just the level of product market fit that we've achieved in both of these dimensions. You know, with new categories, we're now the largest platform with the most amount of partners outside of restaurants in North America. We've gained share in the majority of our international markets and our Volt business overseas in Europe is growing much faster than peers. And so we're seeing a lot of progress there and we're doubling on that momentum. At the same time, we're very observant about our unit economics. And a lot of that progression is reflected into some of the guidance that we shared for 23, but also in what we expect to see on a go-forward basis as we continue to improve the efficiency of our operations in addition to the quality of our product level. Anything anyone else wants to add on this first question?
spk08: Tony, it's probably maybe I'll add a little bit and then Ravi can take the New York City question. Deepak, I mean, Tony alluded to the strategy to continue investing behind building out a new categories as well as international categories. And, you know, we've put up significant proof points that are quite encouraging in terms of our progress in building scale. So just a couple of data points. Last quarter, we had said our U.S. convenience and grocery business, this is in Q3, you know, had GOV growth of over 80%. That business grew 60% year-on-year in Q4, so still continues to grow at meaningfully higher growth rates compared to the restaurants. Our third-party U.S. grocery business grew 100% year-on-year, both in Q3 and Q4. And then Volt, as we alluded to on our shareholder letter, on a constant currency basis, has grown 50% year-on-year, which is, again, significantly faster than its European peers. And so I take these as positive proof points in terms of not just product market fit, but our ability to drive scale on the platform. In addition, we've got proof points of continued improvements in unit economics. We talked about a third party convenience business. In fact, earlier in 2022, we said it would get to break even on a variable profit basis in 2022. In Q4, we did exactly what we said we were going to do. We got to variable profit break even. a third-party grocery business continues to improve its margins so you know to be clear we have a long way to go but as we continue to improve the products and the product experience we believe we can continue to drive outsized growth in all of these areas of investing behind and continued margin improvement ravi do you want to take the new york city question yeah thanks for being thanks deepak for the question on the new york city impact we've been thinking about this for a while now the impact from a cost perspective is included in our ebitda guidance going forward
spk07: We actually have a number of levers from an operational perspective that we can put in place, including passing on any fees to our audiences to ensure that we can meet our profitability expectations.
spk14: Got it.
spk19: Thank you so much for the answers.
spk14: Really appreciate it.
spk15: Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is now open.
spk19: Thanks for taking my questions. The first one on the DashPass member number, another strong quarter period of growth. Can you just talk a little bit about the biggest drivers of that DashPass adoption growth and any update on spend per member across the DashPassers? And the second one is sort of look at the 2023 guidance. Can you just sort of give us a little, any breakdown at all, how we think about the the GOV and the EBITDA from the core U.S. restaurant business as opposed to all the emerging, faster growing businesses in each of those two pieces? Thanks.
spk08: Maybe I'll start on the DashPass question, Brian, and then Ravi can chime in on the 23 guidance question in terms of what's driving the growth there. Really, look, the DashPass growth has been remarkably consistent over the course of this past year. We exited 21 with 10 million subscribers. We're exiting this year with 15 million. And the pace of that growth has been consistent despite a variety of competitor offerings from both of our competitors in the space. And what that goes through is just evidence, to me at least, that the combination of selection, price, and quality that we offer through our program is resonating with customers. In terms of what's driving the growth, it's not been partnership-driven, as some of our competitors might be. That's a competitive strategy that others are using. The majority of our growth, at least as far as our DashPass program goes, is from our own channels as well as through traditional performance marketing channels. So it's not partnership driven. These are organic channels that ultimately drive the growth that we've seen in the product. Second, the pace continues pretty consistently. And so there's a lot of room to grow. If you think about the size of the DashBoss program, it's 15 million subs. It's still a far cry from other whether it's the number of Netflix members or Prime subscribers. There's a lot of room for us to continue growing, and we're happy with the pace of growth historically, and we're not seeing any signs of that slowing down.
spk07: Thanks, Babir. Let me take the question on the guide. We are not breaking out any specifics, but our US restaurant business is the largest business and it's going to be the major driver both on the top line as well as the bottom line. As we talked about in the shareholder order, we do expect to increase margins both from our US restaurants as well as all of our investment areas going into 2023.
spk14: Great, thank you both.
spk15: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
spk06: Thanks so much for taking the question. Maybe I can focus on Walt. Can you talk a little bit in terms of multi-part on elements of the subscription base of Walt and what you see as an opportunity set there as well as some of the competitive dynamic and how you've stayed in investment mode in Walt and what's that meant for a mixture of growth and possibly taking market share in some of those key markets for Walt? Thanks so much.
spk20: Hey Eric, it's Tony. Yeah, I'll get started and others can chime in. You know, I think the thesis for Volt has remained remarkably consistent. You know, when we met the team, you know, two years ago, you know, we were first struck by how similar we were as operators and how we thought about just building businesses. But at the same time, what we were really impressed by from a business perspective was just the superior level of retention and order frequency it had achieved with its product relative to peers. And I think that remains to be what we've seen today in the data as we've now been partners for a couple of years now where you just see the constant progression of its outperformance on a relative basis. And it's just coming from those cohorts getting larger that retain at higher levels who order and engage more often. That effectively is a geometric sequence of growth that is what you're seeing on a relative basis. It actually isn't that much yet attributed to its subscription products or anything else, which actually lends to its future potential. I mean, there's a couple of things that we're pretty excited about. One is just how underpenetrated it is in most of its geographies. In even its most mature established markets, Volt actually serves a fraction of the actual population here. And second to the premise of the question, there are quite a lot of products that Volt hasn't yet introduced. And in most of these markets, I think there also doesn't really exist that much e-commerce in terms of its behavior relative to some of what you see here in the United States. And so I think there's a lot of opportunity across a variety of vectors for growth.
spk08: And just on the competitive dynamic question, you asked the question of market share. Third-party data, particularly in some of the countries where Volt operates, isn't clean. But if you just simply look at their constant currency growth rate of 50% and you compare it to the European peers or European divisions of more global peers, the Volt business is growing significantly faster. So to me, that suggests market share gains, despite the fact that we don't have precise third-party data to back that up.
spk13: Your next question comes from the line of Lloyd Walmsley with UBS.
spk15: Your line is now open.
spk02: Thanks. Kind of try to bundle a few into one. You've historically talked about, you know, your guidance philosophy being, you know, you give a range. You're not really targeting to, like, beat the high end or hit the high end. It's more a function of, are there things to invest in that look compelling? And if you find things to invest, right, you've don't end up hitting hitting the iron is that still the way that you guys think about guidance philosophy and how do we think about you know the growth opportunities you see perhaps in the 23 versus prior years especially as you kind of get more comfortable with walt and a few in a few markets thanks
spk08: I mean, on the question of guidance philosophy, the way we guide and the way we run the business, I mean, none of that's changed. And we've said historically, you know, the way we run the business is try to maximize scale and put as much on the top line as possible. And we're investing in that regard in order to maximize scale. Now, as far as the EBITDA guidance goes, the guidance range is really meant to create a sense of discipline so that we ensure we can try to fall within the range. Now, precisely where we fall depends on the exact investment opportunities available and their returns versus our expectations. And so to the extent, as you pointed out, investments are available and we like the returns relative to our payback thresholds, we will invest. In recent times, what we've seen is we've outperformed on the top line. where there's been strength in consumer metrics. You've seen our MAU metrics. You've seen our dash pass numbers. That has contributed to incremental top line that has helped us get closer to the top end of the EBITDA range despite a healthy level of investment. So that's just to clarify where we've landed in the range. But the objective, A, the philosophy has not changed in terms of how we manage the business and invest for growth. And then B, our objective is not to try to beat the EBITDA range, but to try to land within it.
spk15: Your next question comes from the line of Michael McGovern with Bank of America. Your line is now open.
spk03: Hey, guys. Thanks so much for taking my question. I recall back earlier in 2022, you gave a number that you had 80,000 net new restaurants and merchants, I think, in Q2. And I was curious how that's tracking at this point as we get into a more potentially recessionary environment.
spk20: do you have kind of an underlying assumption for how that will track in 2023 i guess how important is it to continue to drive new restaurant and merchant signups thank you yeah hey michael um so we've continued to see you know growth in the selection on the platform and that's true both for restaurants and that's also true for non-restaurants actually you know, there's kind of a confluence of two external factors. And in addition to just, I think the team is great execution, which is one, you just see more and more physical retailers digitizing their entire business, which both is a tailwind to our marketplace of joining the marketplace for the first time. I mean, if you looked at, you know, some of the brands that we onboarded in, you know, 2022, a lot of that even diversified beyond restaurants into the grocery sector with, additions like Sprouts or Raley's. We announced all these earlier this year. Then you have additions in the retail category, whether it be Sephora or Dick's Sporting Goods. So a lot of these retailers are digitizing more of their business and coming online to get that incremental business from the largest local commerce marketplace. The second kind of thing that's happening is the fact that because they're trying to digitize their entire these retailers, they are also partnering with our platform products as well, products like DoorDash Drive, DoorDash Storefront, where they're trying to run more of their business in a fashion that both, I think, takes advantage of the convenience economy, but also, I think, just creates a better business model for themselves, right, where they can make more productive use of their square footage by adding more and more sales into a fixed space. And so that's what we're seeing. We're seeing, you know, quite a lot of additions nonstop, you know, candidly, both on the restaurant side as well as on the non-restaurant front.
spk08: And Mike, just one technical point is that, you know, one out of five restaurants goes out of business each year, right? So this is a moving target. There's constantly new restaurants that are appearing that we need to make sure we're staying ahead of. And so, you know, the sales team is always busy and they're always putting up bigger and bigger targets in order to make sure that the selection that's available on our platform is fresh.
spk14: Got it. Thank you.
spk15: Your next question comes from the line of Nikhil Devnani with Bernstein. Your line is now open.
spk01: Hey there. Thanks for taking my question. I had a couple, please. So in the S-1, you provided some really helpful disclosure around contribution margins expanding for mature cohorts. Since then, there's been some changes, labor, regulatory, but also kind of you scaled up more. You have more subscribers today. Just wondering if that 8% threshold that those cohorts got to, is that still the right way to think about kind of mature cohort profitability for the business today? And then I had a separate question on new verticals. Are they acting as a new customer acquisition channel, or is it more a function of engaging the existing customer base? Thanks.
spk14: Nikhil, maybe I'll take the first one.
spk08: The cohort level margins, they're healthy and they're progressing well. We showed you last quarter the total contribution profit for the US restaurant business, which is essentially the aggregated performance of all of the cohorts. And so if you take a step back, the contribution profit of our core business has consistently improved over the past few years. despite post-COVID reopening, despite Prop 22, which is a regulatory shock to the system, inflation, and other things. And this is really the output of this focus on improving the efficiency of our logistics network, improving our defect rates, and so on. And so the purpose of that disclosure was to try to provide a simplified view of the progression that we've seen to the cohort margins, but on an aggregated basis, and to give you a sense of the incremental margins we're seeing in the U.S. restaurant business that are you know in line with what we've said historically um and can you remind me of the second question please yeah sure just on the on the new verticals are they acting as a you know channel for new customer acquisition altogether or is it um more about engaging the customers you already have i got it yeah yeah so so it's two things so it's strategically important for for two purposes first we see a growing number of new customers starting with non-restaurant categories so yes it is a source of customer acquisition because there might be customers out there that didn't find the restaurant they were looking for. And now they find DoorDash interesting because their favorite grocery store, their favorite convenience store is on the platform. So yes, a growing number of new customers start their journey with DoorDash with the non-restaurant categories. Second, at least, and this is based on early signals, the work we've done at least so far, preliminary seems to suggest that customers who order from you know, both restaurants and non-restaurant categories have an increase in their order rate, which is the product of retention order frequency compared to those that are single category. So, you know, both of these things are important reasons for us to continue building multi-category in order to be all things local commerce for our cities. And the last point I'll make is, you know, we're seeing increasing, you know, adoption of our new verticals amongst our NAU base. So we've said in Q4 last year, 14% of our NAUs had purchased from non-restaurant categories. That number in Q4 this year was 17%. So we're seeing steady growth, which is increased adoption in a larger base year-on-year of NAUs.
spk14: Thanks, Prabir. That's helpful.
spk15: Your next question comes from the line of Bernie McTernan with Needham. Your line is now open.
spk16: Great. Thank you for taking the questions. Maybe just a clarification. I just wanted to make sure I got you right, Prabir, that you said 15 million DashPass subscribers at the end of the quarter. So that would be similar or against the 10 million last year. And if you could just discuss the payback period on those subs and if the cost to acquire them has been consistent over the last year or two.
spk08: Yeah, so first question, yep, $15 million is right. So $10 million at the end of 2021 increased to over $15 million at the end of 2022. Payback period, we've not disclosed. We continue to run efficiently. Those payback periods are actually not materially different this year than they were earlier on in the year. So if what you're asking me is, has competitor cross-selling bundles made it harder for us to acquire DashPass subscribers. We haven't seen any noticeable impact so far. I think I said earlier, the pace of DashPass subscriber growth has been relatively consistent each quarter. And on top of that, we tracked the number of new customers that joined the industry. Our share of new customers joining the industry has been consistent this past year. In fact, has actually increased towards the back half of this year. And so both of these data points give me comfort that we haven't seen a noticeable impact from any cross-selling.
spk14: Great. Thank you.
spk15: Your next question comes from the line of Doug Anmuth with J.P. Morgan. Your line is now open.
spk11: Thanks so much for taking the questions. I just had a couple about the 23 outlook. I was hoping you could talk a little bit more about APIs, just kind of how you see them evolving across AFV and frequency, and I guess in particular on baskets, I've referred to them. And secondly, can you talk about gross margins a little bit, some of the tailwinds and perhaps headwinds for next year? And do you need that to expand to drive higher EBITDA margins? Thank you.
spk07: Hey, this is Ravi. Let me take the question on the first piece. On the 23 guidance itself, in terms of KPIs, our goal is to continue to drive both monthly active users as well as order frequency. We continue to see strong signals in our retention, which has stabilized over the last several months. Newer cohorts continue to come in at order frequency higher than what we've seen earlier in the year. Now to your second point. Can you repeat your second question?
spk11: Some of the gross margin puts in states, and do you need that to expand the drive?
spk07: Yeah, on the gross margin piece itself, if you actually break apart the gross margin, core DoorDash gross margin excluding Volt actually increased on a year-on-year basis. That was driven by improvements in Dasher cost as a percentage of GOV, as well as credits and refunds. Some part of that was offset by the higher insurance costs that we've seen in the business. On a consolidated basis, gross margin declined because of mixed shift towards Volt. Looking ahead in 23, we do expect gross margin to be higher than Q4 level.
spk15: Your next question comes from the line of Michael Morton with SVB. Your line is now open.
spk18: Well, thank you for the question. A question on new vertical businesses. If you look at something like package pickup, it suggests that the time-sensitive nature you face in core restaurants could be lower and maybe higher levels of batching. So I was wondering if you could speak to any of the early demand trends and then unit economics you're seeing on some of these new verticals like package pickups compared to prior new verticals. And then just lastly, it may be any update on non-restaurant GOV growth would be, would be great if you could. Thank you.
spk20: Yeah, sure. Maybe I can take the, uh, Tony, I can take the first part of the question and you know, someone can answer, I think the growth rate question, which, which we, um, disclosed before. So on, on, on the, um, on, on the package piece, I mean, we're obviously very excited about what we can build. I mean, think about it. We have 3 million dashers that come to the platform every 90 days. And we have, you know, the most sophisticated logistics systems for last mile. And, you know, when I think about the opportunity, it's quite immense just because, you know, most last mile systems were built during a time when, frankly, there wasn't e-commerce, right? Which means that a lot of the setup isn't really well suited for doing true last mile deliveries. And that's actually why we think there's quite a lot that we can do, that if we can deliver ice cream in 10 minutes or pizza in a similar period of time, we can certainly deliver something that is less perishable with greater time. And to your point, there's lots of opportunities to make the logistics really efficient. So We're quite excited about what this can be. I do think that over time, in addition to becoming the largest local commerce marketplace, we'll also be the last model infrastructure in most cities globally. It's just going to take quite a lot of time to get there. And, you know, the package piece is seeing quite a lot of demand, but it's pretty early, I would say, in terms of, you know, how it works. And so I think it really is a good opportunity example of how we try to solve customer problems at DoorDash. A lot of why we got into that business was really seeing some of the requests from customers come in to support and then acting upon it and running an experiment and then seeing if we can actually build a product that customers love and then we'll actually consider the scaling afterwards. And so it's still in the period of finding and achieving product market fit. That's really where that experiment is right now, but we have many of these experiments across the board at DoorDash, and that's one of the reasons why it's so fun to work here.
spk08: Yeah, and on your question on new categories growth, I think I mentioned this earlier in the call, but I'll reiterate it. Our U.S. convenience and grocery business grew roughly 60% year-on-year in Q4. Our U.S. grocery business grew roughly 100% year-on-year in Q4. And then our vault business grew 50% on a constant currency basis. Again, these are attractive growth rates that we're happy to post.
spk14: Thank you so much.
spk13: Your next question comes from the line,
spk15: of Brian Fitzgerald with Wells Fargo. Your line is now open.
spk22: Thanks. Maybe a related question. Tony, you have large and growing lakes and data sets, which is maybe the most important driver of AI and machine learning models, and it's certainly front and center in the press nowadays. I want to know if you could talk a little bit about how you think these processes impact your business and how you leverage them on a daily basis.
spk20: Yeah, it's a great question. Like, look, there's, I'm actually really glad that AI is having its kind of mainstream moments, you know, these days. And I think there is, you know, quite a lot of potential here. And I do think a lot of it is actually, you know, couched in the way that you described it, which is that the importance of the data and taking that data into translated into pragmatic product, you know, products that actually solve customer problems, right? Like that's kind of the key. And so, For us, we've actually been working with different AI in each of our products probably for the last three or four years now. Some of it you see in the ranking and the recommendations product we use with consumers. A lot of it you see behind the scenes with logistics. You see that now also in our support products. It's really getting users across the board, in other words. I think it's very hard when I think you're at the precipice of a technology to figure out the exact application in which it's going to really realize the technology's full potential. But we certainly see all of these benefits give small improvements that then compound over time. And when you're at the scale that we've achieved in our business lines, it really adds up. And so I really think that this is going to be a big push for us on a go-forward basis or a continued big push, I should say, on a go-forward basis, and it's something I'm super excited about.
spk15: Your next question comes from the line of Yusuf Squali with Truist Securities. Your line is now open.
spk05: Great. Thank you very much, and Pravir and Ravi, congrats. So I guess a two-part question. The macro around the consumer seems to be a bit wobbly right now between a strong employment and dwindling balance sheet. I was wondering if maybe you can comment on what you've seen so far in January and February. I know you've already got it and the guide looks really good. But if I look at the guide for the year, it seems like you're not really assuming much of an improvement Q1 to Q4, at least from a GOV standpoint. So maybe can you just address what you're seeing right now and kind of what you're baking
spk07: in in terms of your guide for the rest of the year in terms of uh you know sequential growth cool uh let me take this one if you look at our results uh we've consistently driven double digit growth rate in gov over the last seven quarters in fact our revenue is actually outpacing our gov growth rate when you look at the core consumer input metrics we're just coming off of a record quarter in terms of monthly active users as well as dashpass subscribers I think what we're seeing in the business is order frequency of the newer cohorts continues to be higher than the older cohorts. Retention of our newer cohorts has been pretty stable for the last several months. To your question on Q1 itself, it's off to a great start. We're seeing continued share gains since the beginning of the year, and that's what's being did to our guidance for the rest of the year as well. Okay.
spk08: And just to add on the full year comment, Yusuf, it's probably, I mean, look, as Ravi said, we've got, we're seeing strong consumer metrics currently, right? Both in Q4 and strengthened to Q1. And so you've got high visibility into the first half of the year, which is why you're seeing a strong Q1 guide. You know, for the full year, particularly as you talk with the second half, You know, there's uncertainty around macro issues, and we're trying to bake in that uncertainty in a fuller outlook because, you know, it's not about a lack of confidence in the fundamentals. It's about uncertainty on the macro conditions.
spk09: Yeah, super helpful. Thanks, Prabir.
spk15: Your next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.
spk09: Thanks so much for taking my questions. Two, please. Delivery Hero has made significant investments in its one-piece convenience product. Can you help us buy the investments of your one-piece convenience product? And then secondly, on corporate, the significant opportunity can just update your progress in terms of making more corporate relationships and corporate ordering. Thanks a lot.
spk08: Can you repeat the second question? Sorry.
spk09: I'm thinking about the old seamless opportunity with corporates. just having more of a corporate relationship and office ordering as more people are back in office?
spk20: Yeah, I can take both of those questions. It's Tony. So I think the first question was around Dashmarts. So we haven't broken out the investment piece behind Dash, the investment budget for Dashmarts. But here's kind of how I've thought about Dashmarts, which is, first, I think it's important to acknowledge that it's not a standalone business. product, right? It's a feature built on top of the largest local commerce marketplace that has the most number of consumers who are the most engaged and also the most number of dashers, none of whom we have to reacquire. The second comment, which makes it just much more capital efficient from an investment perspective relative to a standalone effort, the second comment I'd make here is really the purpose behind the investment. So if you think about where non-restaurant delivery is today. Things like grocery delivery take as an example. It really hasn't achieved the full potential of what we believe the category could become. I mean, at the end of the day, the customer's looking to get everything they ordered inside their cart. They're looking for it at prices that are relatively the same as what they would expect to pay in store. And obviously, they expect the delivery with greater convenience than if they were to do it on their own. But today, that's not what the current-day products offer. But at the same time, we have to make sure that we can work together with retailers to bridge both the short-term challenges of working with third-party retail infrastructure that isn't optimized, nor was it designed for delivery, and create and invent a new model that in which we can co-create with retailers such that we can move the industry forward and actually solve these customer problems to achieve the full potential of grocery delivery or non-restaurant delivery. And so that's really the purpose. And we found quite a lot of different use cases once you've actually mastered the basics of retail, which we're still learning how to do. And we're only about 18 months into the effort, but we really like what we see. And But I think it's important to understand just from a capital efficiency perspective how different it is relative to doing it on a standalone basis. And I think your second question was around corporate orders. I agree. I mean, I think that obviously it took a bit of a hiatus during the onset of the COVID-19 pandemic where obviously offices were shut down and people were less confident about how work would be done and so on and so forth. And that's actually when a lot of our team was able to very quickly pivot into building products that would actually solve for workers at home as all of us kind of got more accustomed to the idea of working remotely or not in the office, especially now as people are getting back into the office. And I think things have stabilized effectively in this post-COVID world. I definitely think that that's a big opportunity moving forward.
spk14: Thank you.
spk13: Your next question comes from the line of Steven Fox with Fox Advisors.
spk15: Your line is now open.
spk17: A couple questions. First, you mentioned in the letter how you're managing for better affordability with your customers. Can you talk a little bit more about that and whether that brings you under like an inflation curve we would think of broadly or how do we think about that going forward? And similar question on, there was a paragraph talking about how you've gotten more efficient. Obviously you're going to get more efficient this year too on some of the things you mentioned, but like how does that curve look this year versus last year in your minds as it contributes to EBITDA? Thanks.
spk20: Sure. Maybe I'll take the first part of the question, which I believe was around affordability. And then I'll let Robbie take the second part on the efficiency side. So on the affordability side, Yes. I mean, as disclosed in the letter, we've taken down transaction costs for consumers by about 8% in the past year. And we're always trying to drive this down, right? And we're always trying to drive this down as we add selection, improve delivery times, improve the accuracy and the quality of those deliveries. So obviously, we're trying to do more than one thing at the same instance. But When it comes to affordability, certainly DashPass has been a big driver of a lot of the affordability gains for our customers, especially as we continue to see consistent ads into the DashPass program. But at the same time, we're working on quite a lot of other initiatives as well to make sure that we can keep making the service more and more affordable. Certainly, we're trying to beat inflation, but hopefully we can do much better than that, especially as we find more creative ways in delivering more and more value back to consumers.
spk07: Let me take the second one on efficiency. For us, when we think about efficiency, it always starts with improving product quality. When we improve product quality, the retention of the platform goes up, whether it's consumers or dashers. When the retention goes up, we don't have to spend as much on retaining existing consumers and dashers, which drives leverage in our sales and marketing. The second advantage we have when we improve product quality is the fulfillment cost per order goes down, whether it's support costs, dasher costs, or credits and refunds. Also, in addition to that, as the product quality goes up, awareness increases, which makes us the ability to acquire consumers and actions at attractive prices even more attractive. The combination of these three factors is what's driving the efficiency you're seeing in the business. In our belief, there's a lot more room for us to continue to improve product quality, which will further drive efficiency gains. And our goal is to reinvest that efficiency back into driving scale in the business. And some of the efficiency gains that you see are included in our EBITDA guidance going forward.
spk14: Great. That's all very, very helpful. Thank you.
spk15: Your next question comes from the line of Ron Josie with Citi. Your line is now open.
spk04: Great. Thanks for taking the question, Prabir. Congrats on the promotion of President Ravi in your new role. I wanted to maybe follow up, Prabir. I think I heard you say 3P Grocery was up 100% in 4Q. I think that's the same growth rate as in 3Q. So talk to us about how the use case is evolving here. Is Is grocery and DoorDash primarily still top-off? Are you getting Sunday orders? Any insights there would be helpful. And then we're now a few months post the restructuring at the end of November, and so we'd love to hear insights on the savings, but perhaps more importantly, just progress operationally around efficiency while still building and launching new products, how that's going internally. Thanks, you guys.
spk20: Yeah, maybe I can start on both of those questions, and then I'll let others add to them. I think So, again, on the first part, with respect to, you know, grocery, yes, it continues to perform and continues to take share. And you're right. I mean, the entry into third-party grocery really for DoorDash has been in solving this top-up use case, right, where you can think of it almost as being the express aisle in many ways. And that was a way to familiarize ourselves with consumers, you know, as we kind of – moved outside of the restaurant category. And I think it was certainly something that worked. I mean, you see it in the games and share, but you also see it in, you know, the improving profitability of that business. At the same instance, you know, we've certainly been working a lot on creating more and more an item-based shopping experience at DoorDash. Now, that takes lots of work on the back end around catalog and many things. And I think that's also now showing promise where we can solve both the use case of the top-up, where I think we're quite advantaged with our logistics network, as well as just how consumers perceive us, but also the stock-up use case, where people are buying bigger and bigger carts for their more staple items. And so we're now seeing both of these types of use cases, even though we entered the category with more of a top-up use case. Um, on the second question, you know, I'll let, you know, maybe others chime in on, on, on some of the numbers, but from an efficiency perspective, you know, certainly that was a really painful decision, right? I think, I think it's helpful to have some context here of, of, of, of how we got there where, um, you know, over the last three years, um, the business revenues have grown about seven X and, you know, we were really trying to catch up to that growth. So the headcount grew about four X, um, And so we were playing catch up, but then we kind of didn't get it exactly right and kind of got a bit ahead of our skis on the hiring. And so that made certain things a bit cluttered. And certainly we needed to make sure that we right-sized the organization so that we're set up great for the future, which we feel very confident about. From an execution perspective, we actually feel like it's made us more focused, you know, on the most important things. And as a result, by, you know, decluttering some of the, you know, management layers as well as maybe coordination meetings that were once quite a large cost to the system. You know, we're getting a lot better. It doesn't mean we're perfect. We have many things we have to figure out. We're still, you know, building many things as we We continue to innovate beyond restaurants as we expand internationally and as we expand beyond our marketplace and build these platform products. We're always going to keep investing and invent new products, but we have to do it with a more focused base.
spk08: And Ron, before we talk about the risk here, I just wanted to confirm. So yeah, in Q3 of last year, Q3 2022, we said the grocery business had grown over 100%. In Q4, it grew roughly 100%, just shy of 100%. So those numbers are right.
spk07: Thank you, Kelly. Thank you for hearing. Just on the leverage itself, yeah, we do expect to drive leverage on our operating expenses in 2023. And that's been included in our EBITDA guidance that we've given.
spk14: Thanks, Roddy.
spk15: Your next question comes from the line of Brad Erickson with RBC. Your line is now open.
spk10: Yeah, thanks. Just two follow-ups, I guess. One on the health of the consumer. You touched on it earlier being, I guess, broadly stable. Just curious if you look at Europe. I think You know, some others have commented that it may actually be getting better, maybe even accelerating at the moment. Just curious if you're seeing that too and what you've assumed as a trajectory there for the full year guide for Europe. And then just one clarification on the grocery inconvenience. Is there any, the 60% growth you've called out, is there any meaningful delta there between the organic growth rate and the 60% or are they basically about the same? Thanks.
spk08: So on the first question, we haven't broken out in VOLT, but we are projecting strong growth for next year. The one caveat I will make, Brad, is when you look at Q1, Q1 has the Omicron comp issue, which I suspect you're hearing from other companies as well. Q1 of last year had this spike because of Omicron. And so you'll see that in the growth rates for Q1 this year. But that doesn't change our optimism and confidence in the full year outlook for VOLT. On your second question, I didn't understand what you meant by organic growth. For us, the entirety of our convenience and grocery business, that growth is all organic. So I'm not sure if that's what you were asking or perhaps I misunderstood the question.
spk07: I think the numbers that we were giving out were just US, so that was organic.
spk14: Got it. Thank you.
spk13: This concludes our Q&A for today and for today's conference call.
spk15: Thank you so much for attending. You may now disconnect.
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